Demand for UK logistics space soars fuelled by online retail demand

Demand for UK logistics and industrial warehouse space—fuelled by the continuing growth in online retail—has continued to soar, with 2021 full year data (for warehouses over 50,000 sq ft in size) showing a new record high in take-up, as 70.1 million sq ft was let or sold for own occupation, according to new figures from Cushman & Wakefield.

The figure was nearly a third up on the previous high in 2020 of 53 million sq ft and more than double the amount of space transacted during a ‘normal’ year pre-pandemic. From an investment perspective, the market also had a record year in 2021, with £17 billion of deals transacted. The final quarter alone saw as much investment as an average calendar year (£6 billion plus).

Demand focused on good quality floor space, with over 40 million sq ft of new space taken by occupiers in 2021. The data showed that for the first time on record, more speculative space (20.6 million sq ft) was taken than built-to-suit, reflecting the urgency with which many occupiers currently need space. 

Demand for UK logistics and industrial warehouse space—fuelled by the continuing growth in online retail—has continued to soar, with 2021 full year data (for warehouses over 50,000 sq ft in size) showing a new record high in take-up, as 70.1 million sq ft was let or sold for own occupation, according to new figures from Cushman & Wakefield.

Online retail was the main driver of lettings, as e-commerce operators committed to 20.5 million sq ft in 2021—accounting for 33 per cent of total take-up of logistics space. Many multi-channel retailers also took warehouses to serve both their online and store-based retail networks.

Logistics providers were also hugely acquisitive in 2021, taking 13.6 million sq ft, or 22 per cent of the 2021 total, a press release from Cushman & Wakefield said.

In response to the exceptional occupier demand, developers delivered 13.7 million sq ft of speculative development, almost double the 2020 volume of 7.3 million sq ft. The development pipeline for 2022 is even bigger, with over 15 million sq ft of space currently under construction. 

The research shows that developers are continuing the trend of building smaller units of 50,000 to 200,000 sq ft, but such is their confidence in occupiers’ appetite for new space, some have committed to larger units of over 400,000 sq ft, and to projects outside ‘core’ locations.

Last year also saw several large pan-European/global portfolios with UK logistics exposure change hands, such as EQT Exeter and Cabot Properties’ portfolios. The trend towards building scale was illustrated by increasing lot sizes.

Another trend is the continuing influx of capital from overseas, with overseas investors accounting for over 60 per cent of total volumes in 2021, compared with 54 per cent in 2020.

Fibre2Fashion News Desk (DS)